You are currently the accountant of KCF Pty Ltd, a fast food company in the Karoo. The owner of KCF, Mr Happy is in the process of opening 10 franchises across the country. A number of tourists and customers of KCF have complimented the food and expressed interest in having a KCF closer to their homes, and this gave rose to the idea of opening franchises. Mr Happy will be selling the franchise licence at a cost of R 120 000. Royalties of 5% on the profit is payable to Mr Happy at the end of every month. Franchisors sign a contract that states all the terms and conditions of the licence. When purchasing the licence the purchaser receives all the secret recipes needed to make the delicious food as well as the branding needed. Q.3.2 Explain whether the unsold licences can be classified as an intangible asset?
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Question 3 |
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You are currently the accountant of KCF Pty Ltd, a fast food company in the Karoo. The owner of KCF, Mr Happy is in the process of opening 10 franchises across the country. A number of tourists and customers of KCF have complimented the food and expressed interest in having a KCF closer to their homes, and this gave rose to the idea of opening franchises. Mr Happy will be selling the franchise licence at a cost of R 120 000. Royalties of 5% on the profit is payable to Mr Happy at the end of every month. Franchisors sign a contract that states all the terms and conditions of the licence. When purchasing the licence the purchaser receives all the secret recipes needed to make the delicious food as well as the branding needed. |
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Q.3.2 Explain whether the unsold licences can be classified as an intangible asset? |
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